Question 1

A major attraction of the flat tax is its simplicity.

Accepted Answer

A) True 
 B)False

Question 2

In Figure 33.4,what is the wage rate received by workers after the imposition of the payroll tax?

Accepted Answer

A) W2. 
B) W3. 
C) W4. 
D) W5. 
A) W2. 
B) W3. 
C) W4. 
D) W5.

Question 3

Compute the tax rates for the three taxpayers shown in Table 33.1.Then use the table to answer the indicated question. $\begin{array}{|c|r|r|r|r|r|}
\hline \text { Taxpayer } & \begin{array}{c}
\text { Income } \
\text { (Dollars) }
\end{array} & \begin{array}{c}
\text { Taxable } \
\text { Income } \
\text { (Dollars) }
\end{array} & \begin{array}{c}
\text { Taxes Paid } \
\text { (Dollars) }
\end{array} & \begin{array}{c}
\text { Effective Tax } \
\text { Rate(Percent) }
\end{array} & \begin{array}{c}
\text { Nominal Tax } \
\text { Rate(Percent) }
\end{array} \
\hline 1 & \$ 200,000 & \$ 100,000 & \$ 6,000 & \% & \% \
\hline 2 & 100,000 & 80,000 & 8,000 & \% & \% \
\hline 3 & 60,000 & 48,000 & 12,000 & \% & \% \
\hline
\end{array}$
 In Table 33.1,the effective tax rate for taxpayer 1 is

Accepted Answer

A) 3.0 percent. 
B) 6.0 percent. 
C) 8.0 percent. 
D) 50.0 percent. 
A) 3.0 percent. 
B) 6.0 percent. 
C) 8.0 percent. 
D) 50.0 percent.

Question 4

Suppose Mr.Lee has total income of $120,000,has taxable income of $90,000,and pays $30,000 in taxes.Considering the information,what is Mr.Lee's effective tax rate?

Accepted Answer

A) 33.33 percent. 
B) 25 percent. 
C) 72 percent. 
D) 66.7 percent. 
A) 33.33 percent. 
B) 25 percent. 
C) 72 percent. 
D) 66.7 percent.

Question 5

The greater the area between the Lorenz curve and the diagonal line of absolute equality,the more inequality exists.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is an example of an explicit income transfer?

Accepted Answer

A) The check received by a person currently employed by the postal service. 
B) A Social Security pension paid to a retired factory worker. 
C) A payment to a member of the U.S.Army who has recently been transferred to Germany. 
D) The paycheck received by a person who missed work last week because of vacation. 
A) The check received by a person currently employed by the postal service. 
B) A Social Security pension paid to a retired factory worker. 
C) A payment to a member of the U.S.Army who has recently been transferred to Germany. 
D) The paycheck received by a person who missed work last week because of vacation.

Question 7

A tax that is designed to be progressive will improve

Accepted Answer

A) Efficiency. 
B) Vertical equity. 
C) Horizontal equity. 
D) Equality. 
A) Efficiency. 
B) Vertical equity. 
C) Horizontal equity. 
D) Equality.

Question 8

Compute the tax rates for the three taxpayers shown in Table 33.1.Then use the table to answer the indicated question. $\begin{array}{|c|r|r|r|r|r|}
\hline \text { Taxpayer } & \begin{array}{c}
\text { Income } \
\text { (Dollars) }
\end{array} & \begin{array}{c}
\text { Taxable } \
\text { Income } \
\text { (Dollars) }
\end{array} & \begin{array}{c}
\text { Taxes Paid } \
\text { (Dollars) }
\end{array} & \begin{array}{c}
\text { Effective Tax } \
\text { Rate(Percent) }
\end{array} & \begin{array}{c}
\text { Nominal Tax } \
\text { Rate(Percent) }
\end{array} \
\hline 1 & \$ 200,000 & \$ 100,000 & \$ 6,000 & \% & \% \
\hline 2 & 100,000 & 80,000 & 8,000 & \% & \% \
\hline 3 & 60,000 & 48,000 & 12,000 & \% & \% \
\hline
\end{array}$
 In Table 33.1,the nominal tax rate for taxpayer 3 is

Accepted Answer

A) 5.0 percent. 
B) 12.5 percent. 
C) 20.0 percent. 
D) 25.0 percent. 
A) 5.0 percent. 
B) 12.5 percent. 
C) 20.0 percent. 
D) 25.0 percent.

Question 9

Government failure

Accepted Answer

A) Occurs whenever the government intervenes in the market. 
B) Does not occur;only market failure occurs. 
C) Results when government intervention fails to improve market outcomes. 
D) Occurs whenever there is market failure. 
A) Occurs whenever the government intervenes in the market. 
B) Does not occur;only market failure occurs. 
C) Results when government intervention fails to improve market outcomes. 
D) Occurs whenever there is market failure.

Question 10

Assume that the marginal tax rate is 10 percent for the first $10,000 of income,20 percent for income between $10,000 and $40,000,and 30 percent for any income over $40,000.If Jerome has taxable income equal to $60,000 for the year,what is his tax bill?

Accepted Answer

A) $6,000. 
B) $13,000. 
C) $15,000. 
D) $18,000. 
A) $6,000. 
B) $13,000. 
C) $15,000. 
D) $18,000.

Question 11

A tax elasticity of supply equal to 0.21 indicates that

Accepted Answer

A) Employers will not hire any workers if tax rates increase. 
B) Employers will hire more workers if tax rates increase. 
C) Workers will not cut back on the number of hours worked if tax rates increase. 
D) Workers will cut back on the number of hours worked if tax rates increase. 
A) Employers will not hire any workers if tax rates increase. 
B) Employers will hire more workers if tax rates increase. 
C) Workers will not cut back on the number of hours worked if tax rates increase. 
D) Workers will cut back on the number of hours worked if tax rates increase.

Question 12

What is the difference between nominal and effective tax rates? What creates the distinction?

Accepted Answer

The nominal tax rate is calculated by di

Question 13

In Figure 33.1,suppose that the Gini coefficient for Omega is 0.55.The Gini coefficient for Alpha must be

Accepted Answer

A) Less than 0.55. 
B) Equal to 0.55. 
C) Greater than 0.55. 
D) 0.45. 
A) Less than 0.55. 
B) Equal to 0.55. 
C) Greater than 0.55. 
D) 0.45.

Question 14

If the Gini coefficient is greater for the United Kingdom than for Japan,we can conclude that the

Accepted Answer

A) Relative distributions of income in the two countries are the same. 
B) Distribution of income in the United Kingdom is less equal than in Japan. 
C) Distribution of income in the United Kingdom is as equal as it is in Japan. 
D) Distribution of income in the United Kingdom is closer to being equal than in Japan. 
A) Relative distributions of income in the two countries are the same. 
B) Distribution of income in the United Kingdom is less equal than in Japan. 
C) Distribution of income in the United Kingdom is as equal as it is in Japan. 
D) Distribution of income in the United Kingdom is closer to being equal than in Japan.

Question 15

Which of the following is a progressive tax?

Accepted Answer

A) The federal income tax. 
B) The Social Security tax. 
C) Local sales taxes. 
D) Local property taxes. 
A) The federal income tax. 
B) The Social Security tax. 
C) Local sales taxes. 
D) Local property taxes.

Question 16

In the United States between 2000 and 2015,the Gini coefficient

Accepted Answer

A) Increased,indicating greater income inequality. 
B) Increased,indicating less income inequality. 
C) Decreased,indicating greater income inequality. 
D) Decreased,indicating less income inequality. 
A) Increased,indicating greater income inequality. 
B) Increased,indicating less income inequality. 
C) Decreased,indicating greater income inequality. 
D) Decreased,indicating less income inequality.

Question 17

The effective tax rate refers to the actual taxes paid as a percentage of taxable income.

Accepted Answer

A) True 
 B)False

Question 18

The argument for greater equality of income distribution in the United States hinges on the idea that low-income earners would be more willing and able participants in the economy if income were distributed more equally.

Accepted Answer

A) True 
 B)False

Question 19

Flat tax critics

Accepted Answer

A) Believe it would make it easier for state and local governments to raise their own revenues. 
B) Believe it would create additional vertical and horizontal inequities. 
C) Point out that it would increase the government's ability to alter the mix of output. 
D) Point out that it would increase home values significantly. 
A) Believe it would make it easier for state and local governments to raise their own revenues. 
B) Believe it would create additional vertical and horizontal inequities. 
C) Point out that it would increase the government's ability to alter the mix of output. 
D) Point out that it would increase home values significantly.

Question 20

In Figure 33.4,what is the burden of the tax on employers?

Accepted Answer

A) The wage increase of W5 - W3. 
B) The wage increase of W5 - W2. 
C) The wage increase of W3 - W2. 
D) The wage increase of W5 - W1. 
A) The wage increase of W5 - W3. 
B) The wage increase of W5 - W2. 
C) The wage increase of W3 - W2. 
D) The wage increase of W5 - W1.

Exam 33: Taxes: Equity Versus Efficiency

A major attraction of the flat tax is its simplicity.

In Figure 33.4,what is the wage rate received by workers after the imposition of the payroll tax?

Suppose Mr.Lee has total income of $120,000,has taxable income of $90,000,and pays $30,000 in taxes.Considering the information,what is Mr.Lee's effective tax rate?

The greater the area between the Lorenz curve and the diagonal line of absolute equality,the more inequality exists.

Which of the following is an example of an explicit income transfer?

A tax that is designed to be progressive will improve

Government failure

Assume that the marginal tax rate is 10 percent for the first $10,000 of income,20 percent for income between $10,000 and $40,000,and 30 percent for any income over $40,000.If Jerome has taxable income equal to $60,000 for the year,what is his tax bill?

A tax elasticity of supply equal to 0.21 indicates that

What is the difference between nominal and effective tax rates? What creates the distinction?

In Figure 33.1,suppose that the Gini coefficient for Omega is 0.55.The Gini coefficient for Alpha must be

If the Gini coefficient is greater for the United Kingdom than for Japan,we can conclude that the

Which of the following is a progressive tax?

In the United States between 2000 and 2015,the Gini coefficient

The effective tax rate refers to the actual taxes paid as a percentage of taxable income.

The argument for greater equality of income distribution in the United States hinges on the idea that low-income earners would be more willing and able participants in the economy if income were distributed more equally.

Flat tax critics

In Figure 33.4,what is the burden of the tax on employers?

Economics: the Core Issues

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National Income Accounting

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Aggregate Demand

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Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

Consumer Choice

Elasticity

The Costs of Production

The Competitive Firm

Competitive Markets

Monopoly

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Transfer Payments: Welfare and Social Security

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